Judith Fitton discusses the scope of pre-nuptial agreements in Essence September issue.
At the start of my career as a family lawyer, pre-nuptial agreements were the preserve of the millionaire. Viewed with huge suspicion by the Courts and Parliament, contracts drawn up by couples before a wedding in an attempt to limit the financial claims of the less wealthy party on a later divorce were frequently held to be against public policy and were frowned upon.
Twenty years on, times have certainly changed.
Family law has gradually moved towards allowing couples to exercise autonomy in their own lives and it is now recognised that couples should be allowed to determine their own affairs. In addition, the increasing number of international divorces in which the couple has signed a pre-nuptial agreement in another jurisdiction, forced the issue into the limelight. Then in 2010, the Supreme Court gave the green light to pre-nuptial agreements with the headline grabbing case of Radmacher v Granatino and set out very helpful guidance to practitioners about how to draft such agreements, when to draft them and what they should contain.
These are the answers to some common questions about pre-nuptial agreements:
Q Should everyone have a pre-nuptial agreement?
A The agreements are very useful if one party to a marriage (or civil partnership) is wealthier than the other or wishes to protect certain assets from later claims or wishes to set aside part of their assets to provide for children from an earlier relationship. They are also very useful if the parties are getting married for a second or subsequent time or are middle aged or older, as their financial lives are then likely to be more complicated.
Q Do we both need our own solicitor?
A Yes. One solicitor will draft the agreement, then the other party needs their own lawyer to advise them on the terms and to negotiate any necessary changes. Both parties having their own independent legal advice is one
of the safeguards recommended by the Law Commission.
Q I’m going to keep quiet about my Swiss bank account – that’s OK isn’t it?
A No. Another safeguard is that both parties must make full and frank disclosure about their financial situations to the other. If you keep quiet about the Swiss bank account, then it will be much easier for your spouse to argue that the agreement was unfair.
Q Can I sign my pre-nuptial agreement at the last minute?
A No. I recommend that agreements are signed a couple of months at least before the wedding to avoid any later claim that one party put pressure on the other to sign. At the very latest, the agreement should be signed
21 days before the wedding, but the earlier the better.
Q What if my circumstances change between the wedding and the divorce? What if I lose my job or have a child?
A The Court will retain the power to make financial orders, if appropriate and if the agreement does not produce a fair result. Most agreements contain a review clause and I will ask clients to think about what could happen in the future and how they plan to deal with that. The birth of a child is usually a game changer, unless this has been specifically covered in the agreement.
Q Are pre-nuptial agreements legally binding?
A Good question. It is impossible to prevent a divorcing party making an application to Court for financial orders, whether they signed a pre-nuptial agreement or not. The Court will not allow its jurisdiction to be fettered. However, if the other party wants to rely on the agreement to reduce the claims of the other party, they can ask the Court to treat it as a ‘knockout blow’ or a ‘factor of magnetic importance’ and for the Court to make an Order in the terms of the agreement. If the recommended safeguards are followed, then the Supreme Court has held that:
“The Court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement.”
This means that the Court will give proper weight to the agreement when considering all the relevant factors of a case and if the agreement was drawn up properly and the recommended safeguards were followed, it has a good chance of being upheld.
Q We know what we want to put in the agreement – can’t we just draw it up ourselves?
A Bespoke agreements which are tailored to the family’s specific circumstances hold the best possible chance of being upheld by the Court in the future and I would not recommend a DIY approach.
Q We were too late to draw up an agreement before the wedding – can we do it afterwards?
A Yes, post-nuptial agreements are just as good as pre-nuptial agreements and provided the less wealthy party does agree to sign the document after the wedding, they could be viewed as being less vulnerable to attack for claims of duress. It can be stressful to try and think about an agreement before the wedding and negotiations can be less rushed and more productive after the honeymoon.
Q My wife is French and I am English – do we have to worry about French law?
A Yes, ideally you should instruct lawyers in both countries to draw up agreements that will achieve your aims in both jurisdictions. You can also state in the agreement which country you would like to hear any later disputes, if you do divorce.
Q My fiancée has said that she’ll sign anything, she won’t even bother to read it. Is that OK?
A No, it is vital that both parties have a full understanding of what they are signing and an opportunity to participate in the drafting of the agreement. If she is able to say later that she did not know what she was signing, the Court may not then hold her to its terms.
Q Can I exclude all of my husband-to-be’s claims? He says he would be happy to walk away with nothing.
A That depends on his wealth in his own right and his ability to provide for his own needs, following a divorce. It is vital that the agreement caters for the basic needs of both parties and often that means ensuring that the less wealthy party will walk away with secure housing or at least a deposit to put towards their new home.
Q Pre-nuptial agreements are not very romantic, I’m worried about mentioning it to my fiancée!
A Most couples now have very matter of fact discussions about what they would want to happen on a later divorce and it is usual for negotiations to be conducted quickly and amicably. Pre-nuptial agreements have lost the stigma of old and are properly viewed as being useful contracts which can avoid disputes and legal costs in the future.
Judith Fitton is a Family Law Partner at Mundays. For more information contact firstname.lastname@example.org | 01932 590 557